An informed and thought-provoking analysis of what lies behind the headlines and headaches of business ethics and corporate social responsibility

Friday, February 8, 2013

The beautiful game? You bet!

Ethics in
sports has become a big talking point. In North America, we are just at the end
of a humongous news cycle on Lance Armstrong’s ‘confessions’ on the Oprah
Winfrey Show. Armstrong’s story very much turned – as many ethical issues tend
to – into a story of character, personal integrity and individual morality.
Even though most people know by now that doping in cycling is endemic and that he
is probably much more the product of entrenched practices in the business of
professional cycling. We have commented on ethics in sports here and there in
the past and this week’s installment of scandals in professional sports seems
another good occasion to add some observations from a business ethics angle.

We are
talking about the news from Europol (the pan-European crime investigation unit)
revealing large-scale match fixing activity in global professional football (or
soccer, for our North American readers). They claim to having identified 380
manipulated games (at all levels) and 425 individuals implicated in making some
€8m by betting on games with individual players, referees or officials
accepting bribes up to €140,000 in one case! The international network of
criminals betting on football games by bribing those with influence on the
outcome of the games was allegedly run out of Singapore. With football being a
multibillion industry itself this case of corruption seems to have all the
trimmings of a good business ethics case.

To
understand the reasons, dimensions and mechanisms of such an ethics scandal we
always find it useful to look at the structure of an ‘industry’ and the basic characteristics
of the environment in which it operates. Our colleague Wolfram Eilenberger (former University of
Toronto Philosophy Professor and football wonk) has done so
in an interview this week on German radio. Here are some of the take-aways.

Uncertainty. ‘Folks go
watching football because they don’t know the outcome’, Eilenberger cites the
legendary German coach of the 1954 world cup winning team Sepp Herberger.
Uncertainty is a core element of football – but also its Achilles heel. It is a
game which despite any such intimation has never been able to be fully
determined by money, skill, legacy or past glory. Just one example: when Roman
Abramovic took over the English Premier League Club Chelsea F.C. in 2003 with endless amounts of cash, despite a
buying spree of the top players and coaches, it still took the club seven years to
finally win the ultimate prize in European football, the Champions League. This
has always been the fascination of football. It is at once the strongest
temptation to manipulate the game and the reason why this betting scandal is also
its greatest threat.

Rare events. Football is
not basketball or cycling. Success is not measured by many scores, many moves, multiple chances and efforts on the pitch, or by a long period of competition. It may be
one lucky goal – or even in some cases in a tournament no goal at all - which may
win the game for one side. It is therefore a relatively minor effort to link
bets to the outcome of football games. It is not about orchestrating a
complicated team of actors, or manipulating a complex set of circumstances. If
you can somehow influence this one event, this one goal (or its absence for
that matter), you can have a fairly strong handle on the outcome of the game.

Small
number of key actors. Closely connected
is the fact that in order to manipulate the outcome of a football game you only
need to manipulate a relatively small number of actors. Most prominently the
referee, the goalkeeper, and maybe one of the key strikers would come to mind
here. The temptation then to bribe these individuals is very high as the
limited number makes it not only economically more viable but would also allow
for better chances to keep the entire thing under the carpet. This then makes
the manipulation of the game relatively easy (compared to other sports). For a
referee: an extra penalty given, another red or yellow card can very directly change the result;
for a goalkeeper: to deliberately jump into the ‘wrong’ corner at a penalty
kick, to make simple ‘errors of judgment’ which lead to a goal; for a striker:
to make the ball miss the goal, to make a ‘sloppy’ pass or to give a corner kick
to the opposite side.

Global execution networks. The scandal
uncovered by Europol involves a global network of actors based in Asia (most notably Singapore), which operate from
different jurisdictions, use opaque channels of communication and dispose of a
clandestine network of financial transactions.

All these
characteristics apply to other infractions in business ethics. Insider trading
comes to mind, where often a small number of players, focusing on rare events
(such as the insider information about an impending innovation, losses etc of a
company), in a climate of uncertainty (such as the stock market) collude in
global networks to perpetrate their crimes. We discussed the recent example of
Raj Rajaratnam and his small network of executives perpetrating one of the
largest insider scandals in recent history.

Currently,
the debate on how to tackle this form of corruption is in full swing. The
majority of suspects are allegedly in Germany, Turkey and Switzerland.
Obviously one focus is on how to change the incentives of the few individuals
who can change the outcome of the game. A clear indication seems to be
incentives: often match fixing occurs (or starts) on lower level leagues or
leagues with relatively low pay of players and referees. That seems to be one
of the reasons why the English Premier League shows relatively lesser cases of
criminal incidents in this context. By the same token, the debate now seems to
focus on increasing the punishment of convicted game-riggers.

It remains
to be seen if this approach is going to work. It currently seems that the very
nature of football seems to invite this specific type of crime. And very little seemingly can be done about it without avoiding changes in the fundamental structure of the game.

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Andrew Crane [L] and Dirk Matten [R]

Welcome to the Crane and Matten blog - for informed commentary and expert analysis on the everchanging world of corporate responsibility.

We are two business school professors best known for our books and research articles on business ethics and corporate citizenship. We wrote the Crane and Matten blog from 2008-2015, offering unique insight on a range of issues from across the globe.

Andrew Craneis Professor of Business and Society in the School of Management, University of Bath.

Dirk Matten is the Hewlett Packard Chair in Corporate Social Responsibility in the Schulich School of Business, York University.